In a State of the State address devoted entirely to what he says is Vermont’s “full blown heroin crisis,” Gov. Peter Shumlin on Jan. 8 announced $10 million in new spending on an addiction treatment infrastructure plagued by long waiting lists and a shortage of providers.

“Let’s start treating drug addiction as the immediate health crisis that it is by dramatically increasing treatment across Vermont,” Shumlin said.

What the second-term Democrat didn’t mention in his speech, however, was that only a week prior, his administration had enacted a new Medicaid policy that would discontinue inpatient detoxification services for some of the lowest-income residents in the state.

Mark Larson, commissioner of the Department of Vermont Health Access, said the decision to discontinue Medicaid reimbursement for detox care in hospitals is part of a broader effort to meet the needs of addicts in community-based settings.

The new policy applied only to patients whose addictions were their primary medical conditions.

“What we’re trying to do is to build up the resources so that Vermonters can get the help they need in their community, when that’s effective, so that Vermonters don’t need to access services inpatient simply because there’s no alternative,” Larson said.

The decision to end those Medicaid reimbursements proved short-lived. On Jan. 10, in the face of pushback from providers, the Department of Vermont Health Access “delayed implementation” of the new policy.

The episode highlights the complexity of a treatment system in flux. And it underscores the financial pressures with which human services agencies, state health care programs and addicts will have to contend as the Shumlin administration looks to build a national model for opiate treatment.

What was hailed as a $10 million investment in opiate addiction services is less an addition to Vermont’s health care system than it is a redirection of existing resources. Though it went unsaid by Shumlin in his State of the State address, and in his budget address one week later, his administration is counting on nearly $7 million in savings at the Department of Vermont Health Access to offset the new opiate expenditures. Reductions in acute-care services, like inpatient detoxification, are the areas from which administration officials are hoping to trim costs.

“The ($6.7 million in anticipated savings) was based on an analysis that if you provide greater access to treatment and greater coordination of services, how does that affect the number of people who have acute health emergencies?” Larson said. “How many people attain more success with their recovery? And therefore what kinds of services don’t they need to access in the future?”

Medicaid reimbursements for inpatient detoxification represent a significant and growing portion of the substance abuse treatment budget at DVHA. In 2012, according to data provided by Larson, the state paid for 424 Medicaid recipients to receive hospital detox services. The bill to the state was $1.8 million.

In 2013, the number of Medicaid beneficiaries who received this treatment jumped to 824, and the cost more than doubled, to $3.8 million.

Larson said ramped-up state investments in the “Hub and Spoke” treatment system that Shumlin touted in his State of the State address figured largely into the decision to discontinue Medicaid reimbursements for inpatient detoxification.

In the Hub and Spoke model, centralized treatment facilities team with smaller satellite providers to form a regional network of community-based, outpatient care.

“The assumption is that as resources become available within the hubs and the spokes, there’s an assumption about how that impacts what services Vermonters will access, and the outcomes associated with those services,” Larson said. “And in essence you start having better outcomes for Vermonters in settings that are most effective for them.”

Larson says the decision to end hospital detox reimbursement for Medicaid recipients whose addictions are their main health problem is also based on clinical evidence. Larson’s department announced the policy change in a letter to providers in October.

“The clinical evidence would be that inpatient detoxification is appropriate in cases where there are co-occurring issues,” Larson said. “Significant co-occurring mental health and addiction issues might be a perfectly reasonable instance to do inpatient opiate detox. But in other cases it might be reasonable for someone to receive care in an outpatient setting.”

The policy took effect on Jan. 1, and was met immediately with resistance from providers, who said outpatient detox resources weren’t sufficient yet to absorb the Medicaid-eligible addicts who would now be turned away at hospitals, and at places like the Brattleboro Retreat.

Peter Albert, senior vice president of government relations at the Retreat, said the southern Vermont psychiatric facility has an entire wing dedicated to patients suffering from addiction issues. Albert praised the state’s fast response to the concerns voiced by providers.

“Our conversations have been about, for some people, they need to start their recovery in a more intense setting, like an inpatient setting, and then move down or step down quickly to other step-down services or community services,” he said.

Albert said the state’s underlying hypothesis is a sound one, and that as outpatient treatment options pop up, the demand for inpatient detoxification will wane. But he said outpatient resources aren’t plentiful enough yet to absorb the Medicaid-eligible addicts who would be turned away from inpatient care. And Albert said that some patients will always need the more intensive inpatient services.

“Our thought is that when you’re dealing with an epidemic, you don’t want to limit resources, you want to establish better ways of coordinating and evaluating the services,” he said. “It’s not about starting in one place and ending, it’s about having no wrong door to start your recovery, and then having the ongoing supports.”

Larson said the state agrees that a subset of Medicaid-eligible addicts, specifically those diagnosed with other medical conditions, will continue to need inpatient treatment in hospital settings.

Albert said the Shumlin administration “gets it,” and that by delaying implementation of the new policy, has shown a willingness not to push the system faster than it’s ready to evolve.

Larson said he’s confident that the expanded treatment options will roll out quickly enough to begin to obviate the need for some acute-care services in the next fiscal year, and that early efforts show a track record of success.

He said the state will work with providers and clinicians to decide when it’s appropriate to install the new impatient Medicaid policy.

“The early indications are that those investments (in outpatient treatment) are not only paying off with better outcomes for individuals, but are also more effective investments financially for the state as well,” Larson said. “It’s not just about, is there more? It’s also about, are the pieces working together effectively?”

But in a fiscal year 2015 budget plan that relies on $6.7 million in reductions at DVHA as a result of the Hub and Spoke investments, administration officials will be under pressure to book savings. If the department isn’t able to realize those reductions in the form of reduced demand, it’s unclear whether the administration will resort to programmatic cuts, or ask lawmakers for more money to fill the hole.

“Obviously, if that assumption about ($6.7 million in savings) didn’t play out, we would have to figure out a solution,” Larson said. “Until we see that, and see what the scale of it is, it’s hard to comment on what exactly the solution might be.”